Why microinsurance is an untapped market for insurers

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A significant part of the support needed by these communities is in the area of ​​financial services, be it insurance products or digital payment platforms. Looking at the current picture of financial inclusion, he noted that in Africa, for example, only 3% of the continent is insured, while there are 1.7 billion unbanked people in the world.

“When it comes to microinsurance,” he said, “we are really trying to focus on rural areas and provide a safety net for the people we work with across the space. . There is a lot of different work going on around microinsurance, not just in Africa but also in Asia and Latin America. But there is a lot of room for growth and some really interesting start-ups that can hopefully make a big difference in the world by increasing access to insurance.

Farren pointed out how, in a rural area, the cost of a funeral can be extremely expensive for a family, which can cause them to have to sell one of their key assets. The loss of this income-generating asset will affect their future income and livelihoods, which is an example of the safety net that a microinsurance product can offer. On the health insurance side, if the main breadwinner cannot work, this burden must be shared by the family. “Hospital cash”, which is probably the most popular microinsurance product, does pay out a specific amount per day, usually if the insured person is in hospital for more than two days.

“Then if you look at the agricultural space, which is probably the most interesting in microinsurance, we look at the crop, livestock and weather index products,” he said. “And the Food and Agriculture Organization of the United Nations found that farmers with less than two hectares of land produce about a third of the world’s food, but live in the areas most affected by it. climate change and that they are the least protected against these risks. So you can see why it’s really important to have that safety net in place.

Until now, it has generally been uneconomical for insurers to provide such coverage to these regional businesses, Farren said, but this is changing rapidly given the role of blockchain and parametric insurance products.

The main barrier to adopting microinsurance is the lack of education and trust around these services, he said, as many people or businesses may never have had a relationship with them. a financial institution previously. Rural Inclusion does not offer insurance products per se, but rather seeks to improve financial literacy and work with providers to encourage them to develop people-centered products that are acceptable and suitable for the micro market. -assurance.

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“It’s definitely an untapped market for insurance companies,” he said, “because the technology and micro-finance are already very popular in some parts of the world and I think insurance is the key. next port of call Even if you look at insurtech funding, away from microinsurance, you can see that there is a massive increase, and there has been significant funding for insurtech in Africa. It seems like a really big trend right now and they’re starting to have a lot of success, so there’s no doubt in my mind that insurtechs that focus on inclusion and microinsurance will follow this trend.

Rural Inclusion has just started and will soon start its pilot project in Uganda with the aim of understanding the main problems faced by rural communities, but already Farren and the co-founder of the association Joseph Lukwago are satisfied with the positive reaction. that they had. of the insurance market. It’s great to see the community interest the initiative has generated, he said, and he looks forward to forming strong partnerships within the market in the future.

“We’ve had a great buy-in because the problem for a lot of insurers looking to enter this market is that it’s very different from what they’re used to dealing with,” he said. “They need to understand the real risks and challenges so they can design products that will work and sell at the end of the day. It is therefore very interesting for them to have a partner on the ground who works in the communities and who works with NGOs in all countries and in countries like Uganda.


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